CS FOR HOUSE BILL NO. 166(FIN) "An Act relating to contributions from permanent fund dividends to community foundations, to certain educational organizations, and to certain other charitable organizations; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Stedman stated that the intent today was to discuss the bill, consider a new committee substitute, and hold the bill in Committee for further consideration. 11:04:13 AM AT EASE 11:05:12 AM \ 11:05:14 AM Co-Chair Hoffman moved to adopt committee substitute, Version 25-LS0678\L, Cook, dated May 9, 2007, as the working document. Without objection, the Version "L" committee substitute was ADOPTED as the working document. 11:05:50 AM DAVID GREISEN, Staff to Co-Chair Stedman, informed the Committee that the changes incorporated into the Version "L" committee substitute were intended to reduce costs and assist the Department of Revenue in administering the program proposed in this legislation. Mr. Greisen advised that the change in Section 2, subsection (f) on page 4 lines 8 through 13 would allow the Department of Revenue to charge a $50 fee to each non-profit entity applying for inclusion on the authorized list of charities a person could elect to donate a portion of their Permanent Fund Dividend (PFD) to. The expectation is that 700 of the 2,000 applicants anticipated to apply for inclusion on this list would be approved. The application fee would assist in covering the costs associated with the selection process. 11:07:02 AM Mr. Greisen identified the next change as being in Section 2 subsection (j) page 4 lines 27 through 30. This section would continue the previous committee substitute's requirement that the Department provide an annual report depicting each organization and the donations they garnered the previous year as a result of this legislation; however, the requirement that the report be provided to the Legislature was eliminated as a cost-saving measure. The Department would now simply be required to notify the Legislature that the report was available. Mr. Greisen stated that the application requirements specified in Section 2, subsection (d)(4) and (d)(8) on page 3 line 14 and line 24, respectively, were revised to accommodate non-profit organizations' internal accounting and federal filing restrictions. Mr. Greisen noted that in order to made the administration of the program run efficiently, language in Section 2 subsection (a)(1) on page 2 line 14 was altered to clarify that people could not change the non-profit entities they had chosen to donate to once they had submitted their PFD application. 11:08:53 AM Mr. Greisen next addressed the two changes made in the bill at the request of the Department of Revenue. The first, in Section 1 subsection (b) page 1 line 8, was the removal of the words "and furnish" after the word "prescribe". This would reduce the cost of mailing out hard copy PFD application forms to residents of the State. He noted that the "vast majority of people" now file their PFD application online. The revised language would read as follows. "(b) The department shall prescribe an application form for claiming a permanent fund dividend. … Mr. Greisen stated that the Department would continue to mail out PFD application forms "to rural areas that don't have internet penetration". Thus, people living in those areas would not experience any negative affects. Mr. Greisen stated that not conducting a bulk mailing of the PFD application forms would save the State a significant amount of money. AT EASE 11:10:27 AM / 11:11:31 AM Mr. Greisen noted that the second change requested by the Department is depicted in Section 3 subsection (a)(2) page 5 lines 16 through 21. This language "would allow the Department to set up an electronic system for civilian process servers to garnish PFDs." An electronic system would significantly reduce the amount of paperwork involved in this process as currently all garnishing processing is conducted on paper and mailed. Mr. Greisen informed the Committee that the two changes requested by the Department are anticipated to save approximately $100,000 each year. 11:12:09 AM KACI HOTCH, Staff to Representative Bill Thomas, the bill's sponsor, affirmed that this bill would allow individuals receiving a PFD to contribute a portion of their PFD to a non- profit organization. The goal of this effort is to increase the amount of charitable donations made by Alaskans each year, particularly as the level of charitable contributions made by Alaskans who earn more than $100,000 a year is amongst the lowest in the nation. Ms. Hotch specified that this legislation would allow the State to compile a list of approved non-profit 501(c)(3) organizations. That list would be provided to PFD applicants who could, at the time they submit their application, specify an amount, if any, they would like to contribute to one or more of the organizations. Ms. Hotch pointed out that in order to be approved for the list, the organization must meet criteria specified in the bill. Ms. Hotch specified that while the bill contained a three year termination date, but could be re-authorized by the Legislature. There would be no fiscal impact to the State resulting from this legislation as the Rasmussen Foundation has agreed to administer the program and absorb any associated expenses. 11:13:40 AM Senator Elton asked for further discussion regarding the proposed change to how PFD application forms would be distributed. Co-Chair Stedman advised that that question would be addressed by a representative from the Department. Mr. Greisen agreed that the Department could best respond to the question. 11:14:31 AM In response to a question from Senator Thomas, Mr. Greisen reiterated that the expectation is that 700 of the 2,000 organizations expected to apply for inclusion on the list of non-profit entities would be approved. 11:15:00 AM Senator Olson suggested that the approach proposed in this legislation might also be considered as an avenue through which the State, "as a larger body", might be able to provide Alaskans an opportunity to purchase health insurance. Ms. Hotch acknowledged having talked to Senator Olson's staff about this suggestion. She had not had an opportunity to explore the suggestion and was unsure how adding such language to this bill might impact it. The sponsor would however support "the concept" where it proposed in a separate bill at a later time. 11:15:38 AM JERRY BURNETT, Director, Administrative Services Division and Legislative Liaison, Department of Revenue, addressed Senator Elton's question by expressed that the Department of Revenue and the Department of Law have been actively discussing whether the State is required by law to send a PFD application packet to every household in the State as is current practice. In addition to its expense, it is a wasted effort as more than 70 percent of Alaskans apply for their PFD online and thereby, do not use the mailed out paperwork. Mr. Burnett specified that the proposed change would allow paper application packets to be "selectively" mailed out to anyone who requests them and to those who have applied for their PFD on paper in the past. The intent is to stop bulk mailing the PFD packets as has been past practice. 11:17:22 AM Senator Elton asked how new applicants would be contacted, particularly since it could be extrapolated from the Department's statistics that one-third of the prospective applicants would apply by mail. Legislators would be inundated by questions if access for new applicants was not adequately addressed. While filing electronically was a viable option, he was "uncomfortable taking away the mandate that the Department provide an application." 11:18:19 AM Mr. Burnett acknowledged the concern and noted that, as Legislative Liaison for the Department, any calls Legislators receive ultimately get routed to him. Mr. Burnett compared the proposed application changes to current operations of the federal Internal Revenue Service (IRS) in that as people transition from filing their tax returns on paper to filing online, the IRS stops mailing those individuals paper filing material. Mr. Burnett thought it unlikely that newcomers to the State would be unaware of the PFD program. The prospect of receiving a $1,600 PFD check would prompt a newcomer to contact the State about the PFD application process. 11:19:33 AM Senator Elton asked whether language in the current appeal process could be revised to accommodate an individual who claimed to have been waiting for a paper application and thus had not applied. Mr. Burnett stated that the Department would be willing to work with Senator Elton to address this concern. The Department does not desire to "disenfranchise anyone or make it difficult for people". The goal is to discontinue mailing out PFD application packets because they are not being used. 11:20:38 AM Senator Huggins voiced concern that the Department might be inundated by requests from non-profits entities to be included on the list of approved organizations. 11:21:04 AM Mr. Burnett acknowledged that "the Department is very concerned about the initial effects of this bill on the workload of the Department" in regards to the donation element. To address that concern, an "external organization" such as the United Way would be hired to manage the donation aspect of the program. They would be responsible for sorting the applications. The funds for that entity would be provided by the Rasmussen Foundation. 11:22:00 AM Co-Chair Stedman ordered bill HELD in Committee. RECESS TO CALL OF THE CHAIR 11:22:13 AM / 1:53:34 PM